The yeast retrotransposon Ty5 preferentially integrates into regions of silent chromatin. Ty5 cDNA also recombines with homologous sequences, generating tandem elements or elements that have exchanged markers between cDNA and substrate. In this study, we demonstrate that Ty5 integration depends upon the conserved DD(35)E domain of integrase and cis-acting sequences at the end of the long terminal repeat (LTR) implicated in integrase binding. cDNA recombination requires Rad52p, which is responsible for homologous recombination. Interestingly, Ty5 cDNA recombines at least three times more frequently with substrates in silent chromatin than with a control substrate at an internal chromosomal locus. This preference depends upon the Ty5 targeting domain that is responsible for integration specificity, suggesting that localization of cDNA to silent chromatin results in the enhanced recombination. Recombination with a telomeric substrate occasionally generates highly reiterated Ty5 arrays, and mechanisms for tandem element formation were explored by using a plasmid-based recombination assay. Point mutations were introduced into plasmid targets, and recombination products were characterized to determine recombination initiation sites. Despite our previous observation of the importance of the LTR in forming tandem elements, recombination cannot simply be explained by crossover events between the LTRs of substrate and cDNA. We propose an alternative model based on single-strand annealing, where single-stranded cDNA initiates tandem element formation and the LTR is required for strand displacement to form a looped intermediate. Retrotransposons are increasingly found associated with chromosome ends, and amplification of Ty5 by both integration and recombination exemplifies how retroelements can contribute to telomere dynamics.